With every working American wondering “How much should I save for retirement?”, and many different kinds of advice and answers out there, it’s hard to know for sure when you can afford to retire or how much money you should save. Every person is different, so there is unfortunately no standard rule for how much you should save for retirement. However, depending on your job, income, goals, and other factors, there are some tips that can help you decide.
Check out these tips on figuring out how much you should save for retirement:
- According to Fidelity Investments, a good rule of thumb to follow is saving 8 times your ending salary. This amount helps you ensure that you don’t outlive your savings during your retirement.
- Some people worry that they won’t be able to save 8 times the amount of their ending salary, but don’t worry! Starting small, staying committed to saving, and then saving more and more over time is a great way to build up your retirement savings. For example, experts suggest that by age 35 you should have saved at least 1 times your current salary. You can continue working upwards from there, in order to eventually accumulate the recommended 8 times.
- Keep in mind your unique goals and situation, and adjust this rule of thumb to fit your needs. For example, what if you get laid off? This may eat away at some of your savings while you are in between jobs.
- A life insurance policy can help you plan for retirement, pay off loans, and offer financial stability for you and your family.
- Various factors have an impact on how much money you will need at retirement, and how long it will take you to reach that goal. Some of these include:
- The age you start saving
- The age you hope to retire
- How much money you plan to save each year
- The increase in your salary over the years
- Salary replacement during retirement
- Your life expectancy
- The expected rate of return on your investments
- Another good rule of thumb to follow, according to CNN Money, is to start saving 15% of your income as soon as your twenties.
While everyone is different, and therefore has different retirement plans, one thing remains common for everyone: The earlier you start saving, the better!